Fleet management is a complex subject involving multi-tasking across a range of subjects from vehicle acquisition through maintenance to disposal and an integral element through all of this is finance.
Importance of financial management for a fleet
Fleet is generally the second largest company expenditure after salaries and financial mismanagement can easily sink a business, which means there has to be a constant communication and monitoring of fleet costs between the fleet manager and the finance department.
In a logistics company or a transportation company, fleet managers play a pivotal role. The fleet managers are responsible for selecting and maintaining vehicles in order to keep deliveries and distributions on schedule and within its established budget.
In order to succeed, fleet managers need significant experience and skills in operations, logistics and using software programs to monitor both fleets and drivers.
Function of finance in fleet management
The fleet managers make decisions about what kind of vehicles to purchase and how many. Some companies buy vehicles outright, others will lease vehicles to meet the company's needs. When the vehicle is no longer useful for the fleet, the manager will then market and resell it to get back as much as the company's investment as possible.
The introduction of perks tax in South Africa eliminated the gratuitous ‘gift’ of company cars to all and sundry in an organisation and focused fleet to being able to provide a measurable return on investment for the company.
An organisation’s financial management plays a critical role in the financial success of a business and this includes the tactical and strategic goals related to the financial resources of the business.
A business also must carefully evaluate risk. A primary goal of the financial management system is to minimise risks for the organisation by implementing strategies that help it to counteract unforeseen liabilities.
The relationship between a fleet manager and financial manager
This is a key area in which the fleet manager and financial manager will need to communicate – the fleet manager will define the vehicles the company should be purchasing and the finance department will have to assess that request based on information provided.
There is a significant level of trust embedded in this relationship – are the vehicles requested fit for purpose or are they ‘over specced’? Do the estimated cost per kilometre figures make financial sense? What are the alternatives?
The activities expected from a finance department cover a wide range from basic bookkeeping to providing information to assisting managers in making strategic decisions.
The finance department must contribute to the management and improvement of the operations by measuring and reporting regularly on key numbers crucial to the success of the organisation. Management accounting information is information that managers can use to monitor the operations and decide where further attention may be required.
Looking forward, the finance department will work with managers to prepare the organisation’s budgets and forecasts, and to report on the progress against these throughout the year. This information can be used to plan staffing levels, asset purchases and expansions and cash needs, before they become necessary.
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